Mortgage insurer PMI Group (PMI) is now under the conservatorship of its chief regulator, the Arizona Department of Insurance. Analysts with CreditSights said Monday that based on the firm's analysis of the mortgage insurer's liquidity, it's likely PMI bondholders will be forced to take a significant haircut. The seizure of PMI is a decidedly negative turn but not an unexpected one, as the firm was forced to stop writing new insurance policies in August. Earlier that month, the company's stock dropped 50%. "While we had anticipated a seizure of the subsidiary by regulators, we were surprised by the timing," CreditSights said in a research report. "We currently believe that it is a foregone conclusion that the seizure will stand." Analysts with CreditSights warned two months ago that if the Arizona regulator appoints a receiver and begins liquidating the insurer, roughly $735 million of debt would come due. PMI noted in regulatory filings that it does not have enough capital to meet those obligations. PMI said it is instituting a partial claim payment plan, under which "claim payments will be made at 50%, with the remaining amount deferred as a policyholder claim." The company plans to continue to handle the servicing of policies and loss mitigation programs. Write to Kerri Panchuk.